UK manufacturing sector recovery losing impetus

CBI Manufacturing trends survey

The UK manufacturing sector’s recovery showed signs of losing impetus in October as output and new orders slowed and job losses mounted, according to the latest purchasing managers index (PMI).

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index slipped to 53.7 in October, down on 54.1 in September and against the no-change reading of 50.

The expansion in output reflected improved intakes of new work, companies catching up on orders delayed during the first lockdown, and new export business reflecting increased demand from China and the US and Brexit stock building by clients in Europe.

The intermediate and investment goods industries saw marked expansions in production but the consumer goods sector fell into contraction, with output and new business dropping for the first time since the post-lockdown recovery.

Business optimism was at the highest level since January 2018 but the survey was conducted before the announcement of a second national lockdown in England.

Employment declined for the ninth successive month and the rate of job losses accelerated, with lower staffing linked to redundancies, recruitment freezes, non-replacement of leavers, workforce restructuring and cost-reduction strategies.

The rate of increase in input prices accelerated to its highest since December 2018, reflecting higher raw material costs, shortages, and suppliers raising prices. Part of this was passed onto clients in higher output charges.

Duncan Brock, group director at CIPS, said: “The higher cost of doing business was not the only cause for alarm this month as the outlook for jobs remained painfully weak. More redundancies and restructures reduced headcounts for the ninth month in a row especially at consumer-facing businesses.

“As shoppers continue to press pause on spending, firms will be unable to conjure up the business they need to maintain operations leading to a fretful end to the year.”

Rob Dobson, director at IHS Markit, said: “The outlook for the remainder of the year has become increasingly uncertain, with risks tilted to the downside.”